A Tale of Two Patents

UPDATED: Google's Gmail could be a huge moneymaker for the search leader. But
someone else may have thought of it first.

Google got gobs of publicity when it announced a beta test of Gmail, its
free Web-based e-mail service (Webmail). Some users salivated at the thought of a whole gigabyte of
storage space, while others were shocked
at the price tag: letting Google's ad servers scan the contents and include
contextual ads. (The ads run alongside the e-mail, similar to the way Google
AdWords ads are displayed on its search site.)

The Catch

Google evidently had been planning Gmail for some time. The Mountain
View, Calif.-based company applied for a patent on "serving advertisements
using information associated with e-mail" on June 2, 2003. On that date,
Google's engineers couldn't have known that a little tiny company called
Sponster had a similar idea -- and had applied for a patent on the "method
and apparatus for adding advertising tag lines to electronic messages" on
April 5, 2002.

Because the U.S. Patent & Trademark Office doesn't publish patent
applications immediately, the Sponster filing didn't see the light of day
until October 2003, after Google had applied.

Salt Lake City, Utah-based Sponster was founded early in 2002, but CEO
Roger Little said he and CTO Jason Bosarge had been working for some time on
their technology to scan the body of an e-mail message for key words, and
then attach a relevant, contextual ad. Bosarge shares an earlier patent for
returning search results that includes results ranked by previous searchers.

Sponster began testing its server technology internally in 2002. This
month, it completed an eight-month-long consumer beta test of a free Webmail
service with contextual ads. Gmail launched
in March.

Far from being worried, Sponster's founders welcomed Google's move. "It
legitimized an idea we've had and have been pursuing for a number of years,"
Little said.

In a sense, the well-financed Google did Sponster's market research for
it, including taking flak from privacy advocates and even being the subject
of legislation banning its service.

"We had been wondering how to get this concept out to the public,"
Bosarge said. "We thought it might take some time to educate people. Because
Google has such a high profile, we could have them get the concept out there
and market for us, without us having to do anything."

Google did not respond to several requests for comment. It's being sued
by Overture Services, now a division of Yahoo! , for its
use of the bid-for-ranking method it employs for its AdSense and AdWords
services. Overture claims it has a patent covering the method -- and that
Google willfully infringed on it.

Little and Bosarge are willing to wait for the patent examiner to
determine whether the two patents overlap, a process that could take years
to complete. "We think [the patent applications] are similar," Bosarge said,
"but we don't know yet. We're not patent attorneys."

He declined to say what
the company's attorney has determined. Meanwhile, Sponster's application has
been amended to focus on the concept of contextually enhancing private
personal communications, including SMS and instant messaging, with both ads
and content.

In the best of all possible worlds, such similar applications might be
given to the same examiner, who could evaluate them together and, if there
was overlap, quickly determine which should prevail.

Process and Prior Art at the Patent Office

The USPTO has seven technology centers, each broken down into smaller
areas known as art units. "The supervisors of each art, who determine which
examiners get which cases, tend to give similar cases to the same examiner,"
said USPTO spokesperson Brigid Quinn. In this case, the two applications
were assigned to different examiners, and their official status still is
"ready for examination."

Quinn said that prior to granting a patent, examiners are supposed to
search the files to make sure that a similar application isn't pending. But
the patent is awarded to the first person to invent, not the first person to
file, said Douglas Kline, chair of the intellectual property practice of
Testa, Hurwitz & Thibeault.

"At the end of the day, if it turns out that these competing applications
are trying to claim the same thing, what will become important is who did it
first," Kline said "And that party will be entitled to the patent." He said
that the application itself makes Sponster's service prior art. "If Google
wanted to get a patent on something described on Sponster's application, it
will have to convince the Patent Office it made the invention earlier than
[Sponster did]."

In an environment like today's technology industry, "There's a high
likelihood that people are applying for patents, these patents are being
granted, and there's a high potential for overlap," said David Bohrer, a
partner in the IP litigation group of Dechert LLP. "It's very difficult both
for the U.S. government examiner and for a potential infringer to discover
[relevant patents]."

Bohrer said that while patents are designed to give the inventor control,
often companies have other strategic reasons for building up an intellectual
property portfolio. For Google, he said, "It's a way of developing leverage
to force competitors to cross-license their ideas with Google. If someone
does come after them, [that company] will be counter-sued by Google if
Google can find something in its portfolio that they're infringing."

For example, if Gmail becomes lucrative, and Yahoo! decides it wants to
use Overture's technology to insert contextual ads into Yahoo! Mail, Yahoo!
might be willing to drop its patent infringement suit against Google in
return for a free license to the contextual ads in e-mail concept.

But if Sponster wins the patent, Google would be deprived of that
bargaining chip.

If the patent examiner can't determine which company actually "made" the
"invention " first, the case will be sent to the USPTO Board of Patent
Appeals and Interferences.

If Sponster's application prevails, it could tell Google to pay a fee or
close Gmail. That would suit Sponster just fine; its business model is to
license its technology to other companies. Little and Bosarge already are
seeking licenses, though they declined to state their terms. But Google
could do some bargaining, Bohrer said, for example by offering Sponster the
opportunity to serve some ads to Google users. "The horse trading that goes
on is almost a currency in itself," he said.

If they can't work it out, the two companies will be headed to court,
where the decision will be made by a jury of twelve people, some of whom may
never have used the Internet. In that case, Bohrer said, "They're going to
be looking for who's wearing the white hat and who's wearing the black." And
that will be anybody's guess.

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